Insurance

Insurance

If you're new to the world of insurance or you could use a brush-up tutorial, here is a somewhat subjective list of the types of insurance you absolutely need and types you may want.to consider:

Insurance You Need

Homeowners insurance.

If you own a house, your bank will require you to have homeowners insurance. In fact, "if someone loses their homeowners insurance for some reason – cancellation, nonpayment, nonrenewal, then the bank is notified," says Dan Weedin, an insurance consultant in Seattle. "They will immediately place their own insurance in it and bill the homeowner. Then they will give the homeowner a chance to get their own. The bank will not allow it to go uninsured for any length of time.” Unless you've paid off your mortgage, there's really no way out of homeowners insurance.

Auto insurance.

This is another must-have. In fact, it's against the law to drive without some sort of coverage. If you're caught driving without insurance, you probably won't go to jail, but your driver's license will likely be suspended and you’ll be fined.

Health insurance.

If you are 25 or younger, you don't need to buy health insurance, assuming you're still covered on your parents' policy. But otherwise, add it to your list. To keep health insurance premiums from rising more than they should, everyone needs to pull his or her weight and get covered. If people only buy coverage when they get sick, it drives up costs for everyone. So, as of January 2014, all who can afford it must get covered or pay a fee. Learn more about the health care law here.

Insurance You May Need

Disability insurance

. Regi Armstrong, president of Armstrong Wealth Management Group in Florence, South Carolina, casts his vote for disability insurance as something everyone should consider getting. "Disability insurance replaces one's income if we become incapacitated during our working years," he says. "It's very important when only one person in the household has an income or one has a much larger income than their spouse."

Life insurance.

Generally, people buy a life insurance policy after they're married or have a child. As Laura Adams, a senior analyst at InsuranceQuotes.com, says, "It's critical when your death would create a financial hardship for those you leave behind." Adams also points out that there may be some unmarried, childless people who should get life insurance. "For instance, if you cosigned a car loan, student loan or credit card with a family member or friend, they would be responsible for the entire debt if you died," she says.

Renters' insurance

is an insurance policy which provides most of the benefits of homeowners' insurance. Renters' insurance does not include coverage for the dwelling, or structure, with the exception of small alterations that a tenant makes to the structure. This provides liability insurance. The tenant's personal property is covered against named perils such as fire, theft and vandalism. The owner of the building is responsible for insuring it, but bears no responsibility for the tenant's belongings.

Umbrella insurance.

Think of this as insurance for your insurance. "It's an extra amount of liability coverage in $1 million increments that protects over and above your personal and auto liabilities if they become exhausted," says Weedin, who thinks middle-class individuals and families and those in the upper middle class and higher should consider umbrella insurance. "Generally, a family can add this policy for between $250 to $300 a year," he adds.
Whether you need umbrella insurance depends on what you have to lose and how concerned you are about getting hit with a lawsuit. After all, even if you aren't worth millions, somebody could sue you as if you were. That worry is why umbrella insurance exists. "It's very important for those who might be the targets of lawsuits, like physicians and business owners," Armstrong says.